Question

Exercise 7-17 Accounts receivable turnover LO A1

The following information is from the annual financial statements of Raheem Company.

		Year 3			Year 2			Year 1
Net sales		$	405,140		$	335,280		$	388,000
Accounts receivable, net (year-end)			44,800			41,400			34,800

(1) Compute its accounts receivable turnover for Year 2 and Year 3.

Answer 1

Solution :

Account Receivable Turnover = Net Sales / Average Account Receivable

Average Account Receivable = (Opening Account Receivable + Closing Accont Receivable) / 2

	Year 3	Year 2
(a) Net Sales	$ 405,140	$ 335,280
(b) Opening Account Receivable	$ 41,400	$ 34,800
(c) Closing Account Receivable	$ 44,800	$ 41,400
(c) Average Account Receivable (b + c) / 2	$ 43,100	$ 38,100
(d) Account Receivable Turnover (a / c)	9.4 Times	8.8 Times

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